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COMPETITION TRIBUNAL OF SOUTH AFRICA
Case No: LM147Jan20
In the matter between:
Unitrans Automotive Holdings (Pty) Ltd Primary Acquiring Firm
And
Cedar Isle Auto (Pty) Ltd Primary Target Firm
Panel : E Daniels (Presiding Member)
: A Wessels (Tribunal Member)
: I Valodia (Tribunal Member)
Heard on :31 March 2020
Order issued on :31 March 2020
Reasons issued on :29 April 2020
REASONS FOR DECISION
APPROVAL
[1] On 31 March 2020, the Competition Tribunal (“Tribunal”) unconditionally approved
the proposed transaction between Unitrans Automotive Holdings (Pty) Ltd
(“Unitrans”) and Cedar Isle Auto (Pty) Ltd (“Cedar Isle Auto”).
[2] The reasons for the approval follow.
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PARTIES TO THE TRANSACTION
Primary Acquiring Firms
[3] The primary acquiring firm is Unitrans, a firm controlled by CFAO South Africa
(“CFAO South Africa”) which held 74.9% shareholding in Unitrans, pre-merger. The
remaining 25.1% shares in Unitrans were held by Kepela Investments, a South
African, majority black owned, investment group.
[4] CFAO South Africa is a wholly owned subsidiary of CFAO which in turn is wholly
owned by the TTC Group. The TTC Group is a listed entity in Tokyo, Japan and is
not controlled by any person or entity.
[5] Unitrans operates one of the largest automotive dealer networks in South Africa
with approximately 100 franchised dealerships across the country. Its product and
service offerings include the sale of new and pre-owned vehicles, parts and
accessories and after-market service. Unitrans’ dealerships assist customers with
acquiring consumer credit, insurance products, fleet management services and car
rentals.
[6] The dealerships include vehicles brands such as Audi, BMW, Opel, Isuzu, Ford,
Hino, Honda, Kia, Lexus, Mercedes Benz, Mini, Mitsubishi, Nissan, Renault,
Subaru, Toyota and Volkswagen. In Gauteng, Unitrans operates 38 franchised
dealerships.
Primary Target Firm
[7] The primary target firm is Cedar Isle Auto. The shareholders of Cedar Isle Auto are
Wheatfield Investments (Pty) Ltd (“Wheatfield Investments”), Coetzer Family Trust,
RJ Khoza Family Trust and E Kruger. Both Wheatfield Investments and RJ Khoza
Family Trust are BEE shareholders of Cedar Isle Auto.
[8] Cedar Isle Auto operates 1(one) BMW dealership in Fourways, Gauteng. The
products and services offered by Cedar Isle Auto are similar to those of the
acquiring firm. Cedar Isle Auto sells new and pre-owned vehicles, parts and
accessories and after-market services. Further, Cedar Isle Auto also offers
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customers’ access to financial services related to the purchase of new and pre-
owned vehicles.
PROPOSED TRANSACTION
[9] In terms of the Sale of Business Agreement, Cedar Isle Auto is disposing of its
business to Unitrans as a going concern.
COMPETITON ANALYSIS
[10] The Commission considered the activities of the merging parties and found that
the transaction presents a horizontal overlap in relation to the retail sale of (i) new
passenger vehicles; (ii) used and pre-owned passenger vehicles; (iii) after-market
parts and services in relation to BMW vehicles; and (iv) insurance services.
[11] In terms of the retail sale of new passenger vehicles, the Commission assessed
the market share of new passengers’ vehicles within a radius of 80km in Gauteng
and found that Unitrans holds a market share of less than 7% and Cedar Isle Auto
has a limited presence with a market share of less than 1%. Post-merger, the
merged entity will have a market share of about 7% in Gauteng. The merging
parties will also continue to face competition from several market rivals such as
Bidvest McCarthy, Motus Group, Hatfield Group and SuperGroup amongst others,
which are in close proximity to Cedar Isle Auto, post-merger.
[12] With regards to the retail sale of used and pre-owned passenger vehicles, the
Commission found that the market is highly competitive as most dealerships in this
market sell pre-owned vehicles relative to new vehicles, because dealerships
require agreements with the manufacturers. These pre-owned vehicles can also
be purchased on the internet, at auctions and through private sales. Post-merger,
the merging parties will have a combined market share of approximately 15.67%.
[13] When the Commission assessed the retail sale of OEM spare parts and scheduled
services for BMW vehicles, it found that most of the revenue generated by
approved BMW dealerships is derived from vehicles that have a maintenance or
service plans. There are a total of 16 BMW dealerships in Gauteng, pre-merger.
service plans. There are a total of 16 BMW dealerships in Gauteng, pre-merger.
Unitrans operated 3 BWM dealerships and held a market share of approximately
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18.75% while Cedar Isle Auto operated 1 BMW dealership with a market share of
approximately 6.25%. Post-merger, the merging parties will hold a combined
market share of 25%.
[14] As a result of the low market shares and minimal accretion, the Commission was
of the view that the proposed transaction is unlikely to substantially prevent or
lessen competition in the 3 observed markets.
PUBLIC INTEREST
[15] The merging parties submitted that the proposed transaction will not have any
adverse effects on employment and no retrenchments are anticipated as a
result of the implementation of this merger.
[16] The proposed transaction will result in a reduction in the BEE shareholding in
the target firm by approximately 35.7%. However, the Commission is of the view
that the reduction in BEE will not substantial impact on the BEE shareholding,
in particular black individuals in the sales of motor vehicles, as the acquiring
firm has an interest in the target firm of 25.1%, which is held by Kapela
Investment, a South African, majority black owned investment group which
owns a direct share in Toyota Tusho Africa (“TTAF”). 1
[17] In terms of the transaction’s effect on small businesses (SMMEs) and
historically disadvantaged Individuals (HDIs), the Commission found that Cedar
Isle Auto utilises the services of 4 SMMEs. Unitrans submitted that they will
continue to utilised the service of these SMMEs, as the price offered will remain
market related and the quality of service received will also remain on par with
those of the other service providers of Unitrans.
1 TTAF owns 80% in Toyota Tsusho South Africa Processing (Pty) Ltd (“TTSAP”), a company which
operates a steel processing plant and supplies Toyota South Africa with inner and outer sheet steel
for Hilux and Corolla vehicle.
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[18] Based on the above submission, the Commission is of the view that the
proposed transaction is unlikely to negatively impact on employment, the BEE
shareholding and the participation by HDI’s in the automotive value chain.
CONCLUSION
[19] Considering the above, we concluded that the proposed transaction is unlikely to
substantially prevent or lessen competition in any market. Accordingly, we
approved the proposed transaction unconditionally.
________________ 29 April 2020
Mr Enver Daniels Date
Mr Andreas Wessels and Prof. Imraan Valodia
Tribunal Case Manager : Lumkisa Jordaan
For the merging parties : Gideon Bothma for Unitrans
For the Commission : Raksha Darji and Thabelo Masithulela